Effective on July 1, 2024, Senate Bill 420 (Amendment) amended Chapter 1 of Title 2 of the Official Code of Georgia Annotated and was codified in O.C.G.A. § 2-1-7. The Amendment prohibits nonresident aliens who are either domiciled in, or registered agents of countries designated as a foreign adversary by the United States Secretary of Commerce pursuant to 15 C.F.R. § 7.4 from acquiring or holding, either directly or indirectly, any possessory interest in agricultural land or land within a ten-mile radius of any military base, installation, or airport. The list of current countries subject to the Amendment include China (including Hong Kong), Cuba, Iran, North Korea, Russia, and Venezuela (Maduro Regime).
Background
During the 2024 session of the Georgia General Assembly, legislators proposed five bills to restrict foreign investment in real estate. However, only the Amendment passed both the Georgia House and Senate. Through the Amendment, Georgia follows in the wake of about two dozen other states that have enacted similar laws that limit or ban foreign ownership of United States land. There has been a recent increase in similar legislation at the state level in addition to the federal restrictions already in effect. These state restrictions have been put in place to address perceived shortcomings of such federal regulation.
Summary of the Amendment on Foreign Land Ownership
The Amendment prohibits nonresident aliens, as described below, from acquiring any possessory interest in land that is either agricultural or within a ten-mile radius of any military base, installation, or airport. However, the Amendment does not apply to personal residential property.
Definitions
The Amendment defines “nonresident alien” in three parts, separately defining those that are natural persons, business entities and foreign governments. A nonresident alien, in the context of natural persons, refers to any individual who: (1) is neither a United States citizen nor legal resident, (2) acts as an agent of a foreign government designated as a foreign adversary by the United States Secretary of Commerce pursuant to 15 C.F.R. § 7.4, and (3) has been physically absent from either the United States for more than six months out of the most recent twelve months before acquiring the possessory interest, or from Georgia for more than two months out of the most recent twelve months preceding the acquisition of the possessory interest. Notably, purchases by agents of foreign governments who are not absent from Georgia or the United States for the time periods set forth above are not subject to this Amendment. This limitation may limit the Amendment’s application as a “nonresident alien” would only need to maintain a presence within Georgia or the United States for the time periods previously set forth to avoid the Amendment’s reach. The Amendment defines the term “agent of a foreign government” as any person who, within the United States and at the order, request, or under the direction or control of a foreign government, either engages in political activities, acts in a public relations capacity or as a political consultant, solicits or dispenses anything of value, or provides representation before any agency or official of the United States government, in each case, for or in the interests of such foreign government. Notably, any person who holds themselves out to be an agent as previously defined will be considered an agent regardless of whether a contractual relationship exists.
A business entity is considered a nonresident alien if it is either domiciled (1) in a country that has been designated as a foreign adversary by the United States Secretary of Commerce pursuant to 15 C.F.R. § 7.4, or (2) in the United States, but twenty-five percent (25%) or more of the entity’s owners are business entities domiciled in a country that has been designated as a foreign adversary by the United States Secretary of Commerce pursuant to 15 C.F.R. § 7.4. An entity is domiciled in the country in which it is registered. Importantly, this language does not appear to extend to entities owned directly or indirectly by natural persons domiciled in countries that are designated as foreign adversaries. Thus, an entity domiciled in the United States that is owned by natural persons that are domiciled in a country designated as a foreign adversary may not be designated as a nonresident alien under the Amendment because the “nonresident alien” status of the natural person owners would likely not be attributed to the entity.
A foreign government is considered a nonresident alien it has been so designated by the United States Secretary of Commerce pursuant to 15 C.F.R. § 7.4.
“Agricultural land” in the context of the Amendment means any land that is capable for use in the production of agricultural products (including crops, timber, livestock, poultry, dairy, fruit, etc.), excluding any land that is zoned for a use other than agricultural purposes. The Amendment also excludes “residential property,” which is defined to include real estate that is intended to be used as the purchaser’s dwelling pursuant to O.C.G.A. § 8-3-201. Finally, while the Amendment addresses the acquisition of “possessory interests,” it does not define this term. This leaves open the issue of whether this Amendment applies to leases, in addition to fee ownership.
Exceptions and Timing
The Amendment includes a few exceptions. For example, as mentioned above, the Amendment does not restrict nonresident aliens’ possessory interest in residential property intended to be used as the nonresident alien’s dwelling. Further, the Amendment does not apply to business entities leasing land with the purpose of using that land for agricultural research and development or experimental purposes. Agricultural research and experimental purposes includes testing, developing, or producing crop production inputs (e.g., seeds, pesticides, fertilizers, etc.) for sale or resale to farmers.
In regard to time limitations, nonresident aliens with a possessory interest within the Amendment’s scope as of June 30, 2024 have until June 30, 2027, or three years, to dispose of the interest. The Amendment also includes time limitations for certain kinds of acquisitions. Specifically, nonresident aliens may acquire a possessory interest by devise or inheritance, as security for indebtedness, in the collection of debts, or by any procedure for the enforcement of a lien or claim thereon. However, the interest must be disposed of (1) within one year of acquisition if acquired by devise or inheritance, and (2) within two years of acquisition if acquired as security for indebtedness, in the collection of debts, or by enforcement of a lien. Notably, nonresident aliens may retain the possessory interest if the nonresident alien terminates said nonresident alien status within the required times for disposal mentioned above.
Requirement Applicable to Brokers
According to the Amendment, it is incumbent upon brokers to “timely disclose” the Amendment’s requirements and limitations to any client that is either a prospective seller or buyer of a possessory interest that falls under the Amendment’s scope. A disclosure is timely if it made within “a reasonable time under the particular circumstances,” pursuant to O.C.G.A. § 10-6A-3.
Remedial Provisions
The Amendment includes provisions for criminal penalties for individuals who intentionally violate it. Specifically, such an individual shall be guilty of a felony and punished by (1) a fine of not more than $15,000 and (2) imprisonment for no less than one year, but no longer than two years.
The legal counsel of any city, county or municipality in which a subject property is located, the attorney general, and any person who is not a nonresident alien that was a party to the void transaction, may file an action to void the conveyance and have the interest revert to the previous owner. Further, any nonresident alien that purports to acquire such possessory interest in violation of the Amendment has no right to make any claim (1) for restitution of the subject property’s purchase price, or (2) for any other form of payment relating to the nonresident alien’s loss or lack of title. Notably, the Amendment suggests that a subject transaction is void in and of itself through stating that an action can be filed to void a subject transaction. However, the Amendment never expressly states that a subject transaction is void versus voidable. While the statutory language is somewhat unclear, relevant transactions will likely be seen as void.
Potential Future Issues
While the full impact of the Amendment remains to be seen, professionals should be aware of the following potential issues that may present themselves in the future considering constitutional challenges to similar state legislation.
Potential Conflict with the Preemption Clause
The Amendment may face a conflict with the preemption clause vis-à-vis the federal Committee on Foreign Investment in the United States (CFIUS) regulations if the Amendment is seen as an attempt to put regulation of foreign investment in the hands of state officials rather than the federal government. Under the doctrine of preemption, the Supremacy Clause of the United States Constitution states that federal law governs when a federal law and state law conflict. In fact, the Amendment is quite similar to a recent Florida bill—Florida Senate Bill 264—which was recently the subject of an injunction in the Eleventh Circuit based upon a federal preemption challenge.
The Eleventh Circuit held that the plaintiffs were likely to succeed in proving that the bill is preempted by the Foreign Investment Risk Review Modernization Act of 2018—which grants foreign acquisitions of real estate safe harbor from federal national security based restrictions if the transaction is either approved by CFIUS, or if CFIUS finds that the transaction is not subject to its jurisdiction. The Court issued an injunction as to enforcing S.B. 264, but only as to the plaintiffs in the action.
Here, CFIUS has already determined that Georgia real estate does not need pre-approval unless the real estate is within one mile of Fort Gordon, Fort Moore, Fort Stewart, Moody Air Force Base, and naval Submarine Base Kings Bay. While the Amendment does not clearly define the military properties it refers to, the Amendment’s prohibition on foreign owned land in a ten-mile radius of military property, rather than one mile, may be a direct contravention between the federal and state law. Further, CFIUS does not include criminal penalties while the Amendment provides for a criminal felony charge punished through a fine and imprisonment.
Potential Equal Protection Violation
In addition to the potential preemption clause conflict described above, the Amendment may face claims alleging that the Amendment violates the Equal Protection Clause through prohibiting nonresident aliens from owning property in Georgia. The Equal Protection Clause of the United States Constitution prohibits states from denying any person within its jurisdiction the equal protection of its laws. The Amendment may be subject to attack considering that a concurring opinion in the aforementioned Florida injunction explained that the bill also violated the Equal Protection Clause.
[View source.]